Macquarie makes Storm deal
The investment bank has faced a class action over its role selling margin loans to the group of Storm investors, who say they lost up to $290 million in the financial adviser's collapse.
On Friday, the two parties reached a commercial deal that effectively ends the financial cost of the Storm collapse for Macquarie.
It remains in a legal dispute with one investor and is facing a separate action from the corporate watchdog that is expected to entail no financial costs. Macquarie said the settlement would not affect its financial results.
A lawyer representing the investors, Stewart Levitt, said the case was significant because it was the first settlement with a Storm margin lender to involve legal proceedings.
Commonwealth Bank is also facing legal action over its role in Storm, which collapsed in 2009 after advising many clients to borrow against their homes and invest in the sharemarket.
CBA last year made a deal with the Australian Securities and Investments Commission under which it agreed to provide $270 million to Storm customers.
But Mr Levitt, who is also leading a class action against Commonwealth Bank, argued that the Macquarie settlement would put pressure on CBA over its role in the Storm collapse.
"This is the only settlement that's resulted from legal proceedings. The other offers that came from CBA came from deals done behind closed doors between ASIC and the CBA."
Commonwealth Bank this month said it would defend the class action, which it said was misconceived because the bank was not responsible for Storm's advice to its clients.
Mr Levitt is also planning class actions against Westpac and Bank of Queensland over their roles lending to Storm investors.
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Macquarie Group reached an $82.5 million settlement with close to 1,000 investors who lost money in the collapse of Storm Financial. The commercial deal followed a class action over Macquarie’s role selling margin loans to Storm clients and was described as effectively ending the financial cost of the Storm collapse for Macquarie.
The settlement involved close to 1,000 Storm Financial investors who say they lost money when the financial adviser collapsed. According to the article, investors claim they lost up to $290 million in total in the Storm collapse.
Investors launched a class action alleging Macquarie’s role in selling margin loans to Storm Financial clients. The legal action targeted the margin-lending relationship that followed Storm’s advice to clients to borrow and invest.
Macquarie said the $82.5 million settlement would not affect its financial results. The bank still remains in a legal dispute with one investor and is facing a separate action from the corporate watchdog, which Macquarie said is expected to entail no financial costs.
The lawyer representing the Storm investors said the Macquarie settlement could put pressure on Commonwealth Bank (CBA). CBA is also facing legal action over its role with Storm; it previously reached a deal with ASIC to provide $270 million to Storm customers and says it will defend the class action as misconceived. The same lawyer is planning class actions against Westpac and Bank of Queensland over lending to Storm investors.
According to the article, Commonwealth Bank (CBA) last year made a deal with the Australian Securities and Investments Commission (ASIC) under which it agreed to provide $270 million to Storm Financial customers.
Stewart Levitt is the lawyer representing the Storm investors in the Macquarie case. He said the Macquarie settlement is significant because it is the first settlement with a Storm margin lender to result from legal proceedings. Levitt is also leading a class action against Commonwealth Bank and is planning actions against Westpac and Bank of Queensland.
Based on this article, the case underlines that margin lending and banks’ lending practices can lead to significant legal disputes and large settlements when adviser failures occur. It also shows regulators like ASIC can negotiate compensation deals (for example, CBA’s $270 million agreement) and that affected investors may pursue class actions to seek redress.
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